City Council to Discuss ‘CPI Index’ — What the Heck Does that Mean?

Beverly Hills rent-stabilized tenants recently received in the mail a notice that City Council will be discussing ‘CPI Index and Means Tested Housing Assistance Program.’ Most tenants will not know what that means. More importantly, most won’t understand how it could affect them…or why they should care. We applaud the rent stabilization office for reaching out about the meeting but lament that City Hall still can’t get stakeholder communication right. Let’s explain what’s on the Tuesday June 21st agenda.

CPI Index

Update Helen Morales, deputy director of the rent stabilization division, clarified that staff is seeking City Council direction on whether or not to extend the allowed 3.1% rent increase to all rent-stabilized households and not only those households that didn’t get a rent increase prior to the pandemic. If Council agrees, it is not clear how that would be implemented. Tenants must be given 30 days notice, of course, but Council also has a process and it begins with an ordinance. However no ordinance is on offer at this meeting. So we will have to stay tuned. If you want to participate please have a look at the agenda (linked below) and please [get in touch with Renters Alliance](https://bhrentersalliance.org/get-in-touch/) with any question.

‘CPI’ refers to the consumer price index, which is the federal Bureau of Labor Statistic’s index of the change in consumer prices over time. CPI in this context refers specifically to the ‘all-items’ basket of consumer goods and services for the Los Angeles region, including food at home and out-of-the-home, energy, transportation and, importantly, the rent-equivalent cost of housing. The Bureau tracks these changes monthly and reports the changes monthly, both as a basis measure and as a percentage change monthly and annually.

Beverly Hills, like most rent-control cities, uses the percentage CPI to establish the maximum allowable annual rent increase each year.

Pursuant to our rent stabilization ordinance, the Chapter 6 household rent increase percentage is established each July to reflect the May-to-May annual change in prices. The percentage is posted by the rent stabilization office and is the maximum percentage increase in any 12-month period. (Except that landlords can demand 3% even when the CPI percentage is much lower or even zero.)

The rent stabilization ordinance allows landlords of the few remaining Chapter 5 households a maximum allowable annual rent increase that is also based on CPI, however it is calculated monthly using an arcane formula. The rent for these households can be increased by the applicable percentage that applies the month that the rent will rise, but the rent can only rise once in any 12-month period.

Moratorium on Rent Increases and the Council Work-Around

The residential tenant moratorium changed it up by disallowing any rent increase after March 15, 2020 for rent-stabilized tenants. City Council then sunset the residential tenant moratorium effective May 31, 2022 after which rents could rise again. But by how much?

In recognition of high inflation, and a consequently difficult transition after the rent freeze for some households, Council established 3.1% as the maximum allowable rent increase through July 2023. That is significantly lower than CPI (which was about 8% May-to-May). The 3.1% is the workaround.

This is where it gets more complicated: the 3.1% applies only to some households; others won’t see a rent increase at all until July 2023. Ordinance 22-O–2861 brought the moratorium to its end and which also established the 3.1% allowed rent-increase (the workaround) puts it this way:

…for an allowable rent increase, that for any reason, was not imposed or was imposed at a rate of less than 3.10% for the period July 1,2019 through June 30,2020, the maximum allowable rent increase allowed pursuant to Section 4–5–303(C) and 4–6–3 from June 1,2022 through June 30,2023 is 3.10%. Provided, further, if the rent increase was imposed at a rate of less than 3.10%, then the maximum allowable rent increase from June1, 2022 through June 30,2023 shall be reduced by the percent increase that was imposed. — Ordinance 22-O–2861

The operating principle behind the workaround is that the 3.1% increase that Council is now allowing is the same 3.1% that was allowed from July 2019 to March 15, 2020. We go into much more detail in this post: Rent Can Rise Up to 3.1% for the 2019–20 Missed Rent Increase. The rent stabilization office belatedly posted a Rent Stabilization Update with examples to clarify how that provision applies.

The Council workaround clearly left some landlords unhappy. Probably one-quarter of households will pay the 3.1%. A few households will pay some reduced percentage. But most won’t pay any rent increase at all because in theory they already paid it. Landlords understandably want to raise the rent on all of their tenants — not just those that missed a rent increase from nearly three years ago.

What’s on Tap Tuesday Evening?

City Council at the June 21st meeting (read the agenda) will discuss slightly modifying this policy. To what extent it will affect tenants we don’t know because the language is imprecise or perhaps is in error. This is what the rent stabilization office is asking Council to consider:

Uniformly Apply a Rent Increase of 3.1%. As noted earlier in this report, a subset of RSO units are currently allowed a 3.1% increase. This 3.1% increase could be applied uniformly to all RSO units (both Chapter 5 and Chapter 6), excluding units that previously received the increase in 2019/2020 as already detailed in the ordinance. Although 3.1% is less than the current CPI increase, it strikes a balance between an unusually high CPI and allowing housing providers to resume annual rent increases in order to offset rising costs. Such an allowance would also create a consistent increase across all RSO units, and as previously discussed by the City Council any forgone increase could potentially be carried forward to future years when the CPI might return to a lower rate as in years past. — June 21, 2022 Staff Report

We’ve read that paragraph ten times and don’t understand what it is asking. It seems to simply restate the policy in effect now: the 3.1% increase applies to households, including Chapter 5 and Chapter 6, that did not previously pay the increase “as already detailed in the ordinance” (referring to Ordinance 22-O–2861).

However, if the term “excluding” is actually incorrect and it is meant to instead say “including,” then it makes more sense: the 3.1% rent increase would extend to all rent-stabilized tenancies regardless of whether they already paid this carried-forward rent increase from 2019.

We have asked the RSO office to clarify the question but this staff report dropped after close of business on Friday. There is nobody on tap until Monday to address it.

Our Take

We applaud the rent stabilization office for reaching out to tenants with news of the meeting. But the notice sent to tenants didn’t include enough information to convey what will be discussed — or what action may be taken. ‘CPI Index’ is simply too general to describe an action item. And of course the notice didn’t provide a link to the City Council agenda or the relevant staff report.

Helpfully the notice (below) DOES provide plenty of white space for making a grocery list or jotting down your friend’s streaming TV suggestions. Heck, even the back side of the notice is blank. That leaves plenty of room for something informative like a comic strip!

Par for the course. The rent stabilization office rent-increase webpage still posts outdated moratorium information. What will it take to get City Hall to effectively communicate with tenants?!

Resources

CPI notice to tenants June 21, 2022
The notice mailed to rent-stabilized tenants that fails to describe the issue or the action item, and also fails to provide a link to the Council agenda or to the relevant staff report. Plenty of space to make a grocery list, though!